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HSBC says Bangladesh stocks have potential like India, Vietnam

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HSBC says Bangladesh stocks have potential like India, Vietnam

STOCKS

Abhishek Vishnoi & Karl Lester M Yap, Bloomberg
16 August, 2023, 07:35 pm
Last modified: 16 August, 2023, 07:57 pm

Stock image of Dhaka Stock Exchange. Photo: Mumit M
Stock image of Dhaka Stock Exchange. Photo: Mumit M

Stock image of Dhaka Stock Exchange. Photo: Mumit M

Bangladesh's equity market deserves more attention from global investors as rising consumption and foreign investments boost the outlook for corporate earnings, according to HSBC Holdings Plc.

"Like India two decades ago or Vietnam a decade ago, it offers prospects for significant long-term capital appreciation driven by earnings growth," strategists Herald van der Linde and Prerna Garg wrote in a note dated Aug 16. Earnings are expected to grow 20% in the next three years, they said.

Globally, the emphasis on and recognition of ESG (environmental, social and governance) factors have grown significantly in recent years, leading to increased demand for transparency on ESG by companies.

The rare bullish view on the South Asian nation from a foreign broker signals a potential change in fortunes for the frontier market. Bangladesh is also on track to become a major consumer market by 2030, with the size of the population with daily income above US$20 (RM93) set to exceed that of Vietnam and the Philippines, according to HSBC.

Bangladesh's economic growth is forecast to average 7% in the five years through fiscal year 2027, according to the International Monetary Fund, making it one of the fastest-expanding nations in Asia. Gross domestic product growth averaged more than 6% in the past decade and its GDP per capita has recently overtaken India's.



Bangladesh recently allowed its currency to trade freely and adopted a unified exchange-rate regime, which allows for transparency and efficiency in foreign exchange transactions, benefitting businesses. It also secured a US$4.7 billion bailout from the IMF in January to fortify its economy.

To be sure, the country faces multiple risks including bad loans, price restrictions on stocks, a volatile currency, and potential political instability. The nation's equity market is also small — carrying less than 450 companies according to data compiled by Bloomberg — and illiquid. The Bangladesh Dhaka Stock Exchange Broad Index gained less than 1% this year after falling 8% in 2022.

Still, the country's banks should benefit from rising credit growth fuelled by high spending in infrastructure and factories, while its technology companies may gain from a push to make Bangladesh more digital, they added.

 
Bangladeshi stock market is a giant ponzi scheme in the hands of elite few, a market cap of $72 billion does not provide enough liquidity to stabilize it.

Not to mention the fact that you cannot trust the financial statements. Unless there is good governance all around - starting from the Bangladesh government itself, no western investor is going to risk investing in Dhaka Stock Exchange.
 
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Not to mention the fact that you cannot trust the financial statements. Unless there is good governance all around - starting from the Bangladesh government itself, no western investor is going to risk investing in Dhaka Stock Exchange.

I see most Bangladeshi colleagues I have worked with prefers to buy real estate, they avoid stock market as a plague.
 
I see most Bangladeshi colleagues I have worked with prefers to buy real estate, they avoid stock market as a plague.
Well, investment in real estate is almost risk-free but stock market is not.
 
Well, investment in real estate is almost risk-free but stock market is not.

If you follow global real estate, then you'll have a different opinion. But Desis are emotionally attached to their properties, so they don't see apartments or lands as liquid asset.

I have couple of apartments in India, they give a annual property appreciation of 8-10% on average, and rental income of 6%. Beating average return of S&P 500 by a comfortable margin.
 
I see most Bangladeshi colleagues I have worked with prefers to buy real estate, they avoid stock market as a plague.

Yeah that is indeed the case. General Bangladeshis have a negative perception of the BD stock market, and rightfully so.
 
Yeah that is indeed the case. General Bangladeshis have a negative perception of the BD stock market, and rightfully so.

Once large investment houses enter the DSE - they will force transparency - which will give locals confidence.

BD stock market also lacks unicorns to attract long term bets.

Bangladeshi middle class also has less disposable income due to massive cost of housing.

Due to scarcity - property is a safe and lucrative investment in BD and outperforms the stock market.
 
HSBC says Bangladesh stocks have potential like India, Vietnam

STOCKS

Abhishek Vishnoi & Karl Lester M Yap, Bloomberg
16 August, 2023, 07:35 pm
Last modified: 16 August, 2023, 07:57 pm

Stock image of Dhaka Stock Exchange. Photo: Mumit M
Stock image of Dhaka Stock Exchange. Photo: Mumit M

Stock image of Dhaka Stock Exchange. Photo: Mumit M

Bangladesh's equity market deserves more attention from global investors as rising consumption and foreign investments boost the outlook for corporate earnings, according to HSBC Holdings Plc.

"Like India two decades ago or Vietnam a decade ago, it offers prospects for significant long-term capital appreciation driven by earnings growth," strategists Herald van der Linde and Prerna Garg wrote in a note dated Aug 16. Earnings are expected to grow 20% in the next three years, they said.

Globally, the emphasis on and recognition of ESG (environmental, social and governance) factors have grown significantly in recent years, leading to increased demand for transparency on ESG by companies.

The rare bullish view on the South Asian nation from a foreign broker signals a potential change in fortunes for the frontier market. Bangladesh is also on track to become a major consumer market by 2030, with the size of the population with daily income above US$20 (RM93) set to exceed that of Vietnam and the Philippines, according to HSBC.

Bangladesh's economic growth is forecast to average 7% in the five years through fiscal year 2027, according to the International Monetary Fund, making it one of the fastest-expanding nations in Asia. Gross domestic product growth averaged more than 6% in the past decade and its GDP per capita has recently overtaken India's.



Bangladesh recently allowed its currency to trade freely and adopted a unified exchange-rate regime, which allows for transparency and efficiency in foreign exchange transactions, benefitting businesses. It also secured a US$4.7 billion bailout from the IMF in January to fortify its economy.

To be sure, the country faces multiple risks including bad loans, price restrictions on stocks, a volatile currency, and potential political instability. The nation's equity market is also small — carrying less than 450 companies according to data compiled by Bloomberg — and illiquid. The Bangladesh Dhaka Stock Exchange Broad Index gained less than 1% this year after falling 8% in 2022.

Still, the country's banks should benefit from rising credit growth fuelled by high spending in infrastructure and factories, while its technology companies may gain from a push to make Bangladesh more digital, they added.

This is true , under great leadership of Shaikh Hasina ji , Bangladesh will achieve many remarkable financial goals .
 

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